Optimize the procurement process in purchasing in 3 steps

Everyone can optimize their procurement process in purchasing. In 3 systematic steps: Consolidate - Structure - Automate.

It will work for you, too, guaranteed.

The traditional image of purchasing and the demands placed on it have changed significantly. The term Purchasing 4.0 is on everyone's lips. The term focuses on the interdisciplinary, networked, and systematic optimization of the entire supply chain. At the same time, operational and strategic purchasing must detach themselves from the technical constraints and dedicate themselves to the core topics. Learn in the following blog how to optimize the procurement process in purchasing - in just 3 steps.

Tradition and digitization in the procurement process come together and unleash their power.

Rising material costs, higher quality requirements, shorter delivery times, volatile markets, and many more are just some of the challenging constraints. Strategic purchasing and operational purchasing have a more important role in companies today than in the past.

However, we do not want to deliver a theoretical treatise on Purchasing 4.0 here. We want to optimize the procurement process in purchasing. Simple and efficient.

Today, the automated keying of product groups and holistic transparent data are key factors for successful inventory optimization. Does that sound like a lot of work and effort?

SIMUFORM offers tools to support target costing and keying into commodity groups for the discrete manufacturing sector. Optimize purchasing, this is the first step towards purchasing 4.0.

Your advantages through purchasing optimization:

• Consistent implementation of the common parts strategy by the purchasing department
• Better purchase prices through the bundling of requirements
• Support of the standardization processes
• Sustainable monitoring of data quality
• Savings in material and inventory costs
• Transparent target cost referencing
• Support of the material group management
• Fast consolidation of the drawing parts

Read also:
10 Tips on Saving Money in Business. A guide from industrial practice.

STEP 1 - Consolidation

Let's start at the beginning, with the inventory data. Everyone knows what is hidden here. Duplicates and multiple items. Incomplete material masters and superfluous articles. The work of sifting through all this data and drawings is a horror to everyone. Even if you know that every trip around the world starts with the first step, it would be good to know to have a rocket engine and not a bicycle. After all, one wants to quickly experience the beautiful sides of this "data journey".

Figures from practice

For a machine builder with good organization and about 100,000 drawing parts, the number of duplicates and triplets after a duplicate check by SIMUFORM usually amounts to about 2,500 drawing parts. Identifying these duplicates and triplets in the data stock is tedious and not a pleasure. Students and trainees are often tormented with this work.

But this can be done easily and automatically with the SIMUFORM process.
An example: Find duplicates easily and efficiently.

Now we are looking to the future and enabling you to mobilize this minimum potential annually through this consolidation alone.

STEP 2 - Automation in purchasing through coding according to material groups

Are you faced with the mammoth task of organizing 100,000 drawing articles into product groups? And 10,000 more are added every year. That's a lot of work if you want to manage it conventionally.

Perhaps you are already using an eCl@ss approach for this. But there is no end to the work! So you take a shortcut in case of need: In many companies not all products, articles, drawings and parts are classified into commodity groups. Reason: The effort is too great and the work is very tedious. One uses the 80-20 rule, the Pareto analysis and applies the material group management only to 20% of the parts. Of course, it is better to record 100% of the materials - isn't it?

Project "Optimization of Purchasing" and "Optimization of Besschafungs" becomes reality

SOMEWHAT MORE SPECIFICALLY: The material groups are often subdivided via material, complexity and technology - alternatively via eCl@ss. These material groups can then be used to easily assign suppliers. Which path of material group assignment would a gear shaft, for example, go through at this point? In the case of gear shafts, for example, at least 2 pieces of information are certainly already specified in the design, which make such an assignment possible. The gear shaft is made of a hardenable steel, has several steps and is therefore complex. Technologically, it is a machined part, more precisely a turned part. Using this assignment to the associated material group, it can be further subdivided according to the size, weight and number of pieces and then requested from the relevant suppliers who specialize in the production of such turned parts. Optimally, a supplier evaluation has also already taken place.

Optimization of strategic purchasing - the purchasing lever!

Using the methodology outlined above, you can optimize the following purchasing levers:

• Bundling of needs.
• Bundling of required specifications.
• Bundling of purchasing volumes.
• Bundling of material.
• Bundling of technology.

That all sounds quite plausible. It is. But it is precisely this allocation that makes life difficult for materials management. Because with about 15,000 new drawing parts per year in the area of special machine construction, this would usually have to be done manually. In most cases, however, there is not enough time for this - according to the feedback from SIMUFORM's current customers.

Step 3 - Scale your success through automation: through the world of data at the speed of light.

Our SOLUTION: From a purchasing perspective, 10 to 20 reference parts are assigned for all master goods groups. No more. This is not done manually, but graphically interactive via the SIMILIA solution from SIMUFORM. The work is easy to do. With the help of the simple set up system, all existing technical, technological, and commercial information is available to the purchaser.

At the same time, we have a complete visualization of the data for a graphical evaluation. The creation of, for example, 50 product master groups with 20 reference parts each requires no more than 2 to 3 days of work. Thus, of the total of 50,000 drawing parts, a maximum of 1,000 are entered into the goods master groups. Basically, however, the purchasing department should have knowledge of how to create these goods master groups.

Take it all and not just 20%.

As soon as the goods master groups with the reference drawing parts have been created, the next phase begins: automatic data assignment. Here, the automated procedure is started. This procedure is now able to automatically assign the remaining 49,000 drawing parts to these goods master groups. In this way, you are not limited to 20% of your data when coding by material groups, but to all available drawing parts.

The tool used does not require any attributes or material master data in this step, only the drawing parts. In this way, you could transfer a very large dataset to the material master groups in a short time. In the next step, each material master group is divided into subgroups based on only a few additional characteristics (material, technology, complexity).

In most cases, this flat structure below the material master group is sufficient to use the material groups sensibly for application area 12 of procurement. The information now available for the subgroups is basically available in the system, and a simple set of rules can be used to transfer each drawing part of a commodity master group to the correct commodity group - fully automated.

Read more about the use of SIMILIA for target costing.

Validate your target costs with simple but effective methods.

This procedure can be further refined in that validated price information is successively stored for the reference parts if it is not already available. In this way, regression methods can be used to determine the target price for each material group as a function of the number of pieces, material price and weight. It makes sense to use the regression method at this point because it is only applied to a selected material group together with technology and material complexity information. Compared to the conventional method and the manual assignment of the drawing parts to the respective material groups, the effort involved in this solution is only a fraction.

Welcome to Purchasing 4.0 - Digitize Purchasing - Optimize Purchasing - Automate Purchasing Processes.

Download the free information brochure on the topic of "Purchasing 4.0" with further examples from practice here:

...and if you want to know how to optimize other processes in purchasing, then read on here:

"Making optimal use of target costing and target cost analysis."